Sean Graham (left) and Liam Hennessy

The number of breaches that have been reported to ASIC has been much lower than the regulator expected and it will strengthen compliance in response.

On Thursday morning, the corporate regulator released a report on the first nine months of the breach reporting regime which found only six per cent of the licensee population lodged a report.

Some 74 per cent of all reports were lodged by just 23 Australian financial services or credit licensees.

“[It] suggests that some licensees may not have in place the systems and processes required to detect and report non-compliance,” the regulator said.

ASIC commissioner Sean Hughes said in a media release accompanying the report that licensees should be aware of their obligations and fully comply with the regime which has now been in place for a year.

“ASIC will be undertaking a number of activities to strengthen compliance with the regime,” Hughes said.

Of the 8,829 reports, most related to credit and general insurance with financial advice only accounting for 878 in total. Breach reporting was introduced in the suite of regulatory forms a year ago which has become known as ‘Red October’.

In May, a report from Gadens and Lawcadia found the industry was struggling with breach reporting which ASIC acknowledged three weeks later at the SIAA Conference.

ASIC announced in August it would engage with Treasury and the industry over how the system operates and can be improved.

Size matters

Assured Support managing director Sean Graham said there was some frustration from the bigger licensees who feel the results reflected poorly on them despite doing the right thing.

“ASIC is suggesting in their report they would’ve expected a higher level of breaches from some of the smaller entities,” Graham said.

“But smaller businesses are closer to all the activities and what is going on. The chances of those significant breaches coming up and needing to be reported are far less.”

Gadens partner Liam Hennessy said the advice industry in a tricky position because smaller licensees have the same obligations as the larger ones but without the same resources.